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samz
Joined: 19 Feb 2008
Posts: 102
Location: Medford, MA
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 Posted: Fri Jun 12, 2009 4:02 pm GMT Post subject: |
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[quote="WestCoastXPlant"]samz, it's very likely that the owners of that home, were they to sell it, would ask well above Zillow estimates. In fact, I'm fairly convinced that the day I see a house asking below Zillow, I'd buy it.[/quot]
True -- I can hope, though, can't I? 
| WestCoastXPlant wrote: | | And even more amazing, .32 of my income comes pretty darn close to 1.6 * my current rent...I've never particularly "calculated" this when searching for a rental, kind of went by "what do I feel like paying" and still having a life. I haven't found, in real life, a house that's equivalently nice to my rental at that price -- that's when I'll buy it |
Nice. Cool calculation. |
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JCK
Joined: 15 Feb 2007
Posts: 559
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| Posted: Fri Jun 12, 2009 4:06 pm GMT Post subject: |
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| WestCoastXPlant wrote: | samz, it's very likely that the owners of that home, were they to sell it, would ask well above Zillow estimates. In fact, I'm fairly convinced that the day I see a house asking below Zillow, I'd buy it.
JCK and mpr, I have to say that I've been amazed, in the last year, to realize how much "traditional" valuation methods all converge to the same number, +/- 100 bucks. I've never seen your method of calculation before, but I've always heard the guidance that PITI should be 1.6-1.7 of rent -- which is smack down what your calculations come to.
And even more amazing, .32 of my income comes pretty darn close to 1.6 * my current rent...I've never particularly "calculated" this when searching for a rental, kind of went by "what do I feel like paying" and still having a life. I haven't found, in real life, a house that's equivalently nice to my rental at that price -- that's when I'll buy it
How did we ever get into this bubble mess -- the numbers work out so beautifully?! If only people respected that... |
Yeah, we own a small 2 BR condo, and the numbers work out as described by any of the above methods.
However, when I look at what it would take to upgrade, I just can't see the value proposition. The 3 BRs that I see with equivalent features (e.g., parking, decent building/neighborhood) are anywhere from 50% to 100% more in cost than our 2 BR. The rental cost differential between a 2 BR and 3 BR, by contrast, is closer to 25 or 30%.
So, there's a big bulge in the 3 BR+ sales market. I can easily see these $600k homes dropping to $500k (where they probably belong).
If we feel the need to move to larger place, I'm probably going to sell and rent. Some nice places are out there, and at a cost less than buying. I just don't see the point of pouring all my income into a house. There's just more to life than that. |
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mpr
Joined: 06 Jun 2009
Posts: 344
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| Posted: Fri Jun 12, 2009 4:45 pm GMT Post subject: |
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| WestCoastXPlant wrote: |
How did we ever get into this bubble mess -- the numbers work out so beautifully?! If only people respected that... |
Its because people expected substantial appreciation year after year
after year - in short we were in a bubble.
Even the "professionals" - the credit ratings agencies - were assuming
a "conservative" 8% out till the end of time.
When we bought our place in Chicago our realtor told us "prices haven't
dropped in the last 70 years" which, as I knew at the time, is a ridiculous statement.
In fact historical house price appreciation over the last couple
of hundred years is about 2% per annum in real terms and
there were plenty of examples of house price crashes outside
the US. House prices in Hong Kong dropped 65% earlier this decade
after a speculative boom. |
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balor123
Joined: 08 Mar 2008
Posts: 1204
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| Posted: Fri Jun 12, 2009 5:44 pm GMT Post subject: Re: renting vs. buying |
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| melonrightcoast wrote: | | Our current rent is $1900/mo for a brand new 3 bed/2 bath "luxury" apartment, just under 1400 sq ft. A little more than I had wanted to pay, but we have a short-term lease (i.e. less than a year). |
Not a bad deal. Where is this, if I may ask? |
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balor123
Joined: 08 Mar 2008
Posts: 1204
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| Posted: Fri Jun 12, 2009 5:52 pm GMT Post subject: |
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| JCK wrote: |
However, when I look at what it would take to upgrade, I just can't see the value proposition. The 3 BRs that I see with equivalent features (e.g., parking, decent building/neighborhood) are anywhere from 50% to 100% more in cost than our 2 BR. The rental cost differential between a 2 BR and 3 BR, by contrast, is closer to 25 or 30%.
So, there's a big bulge in the 3 BR+ sales market. I can easily see these $600k homes dropping to $500k (where they probably belong). |
I get the same impression. There were a lot more 1br and 2br condo starter condos built in the last decade than 3-4br. I think towns liked them because it supported the lowest level of the housing latter, supporting the high house prices without directly competing with them. I suspect many homeowners got comfortable with betting that housing would always increase after seeing the price appreciation on their condos. Most houses built in nice neighborhoods were in the high end. |
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JCK
Joined: 15 Feb 2007
Posts: 559
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| Posted: Fri Jun 12, 2009 6:24 pm GMT Post subject: |
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| balor123 wrote: | | JCK wrote: |
However, when I look at what it would take to upgrade, I just can't see the value proposition. The 3 BRs that I see with equivalent features (e.g., parking, decent building/neighborhood) are anywhere from 50% to 100% more in cost than our 2 BR. The rental cost differential between a 2 BR and 3 BR, by contrast, is closer to 25 or 30%.
So, there's a big bulge in the 3 BR+ sales market. I can easily see these $600k homes dropping to $500k (where they probably belong). |
I get the same impression. There were a lot more 1br and 2br condo starter condos built in the last decade than 3-4br. I think towns liked them because it supported the lowest level of the housing latter, supporting the high house prices without directly competing with them. I suspect many homeowners got comfortable with betting that housing would always increase after seeing the price appreciation on their condos. Most houses built in nice neighborhoods were in the high end. |
And if you bought in the early 2000s, you've probably gained $50k-$100k on your 1 BR or 2 BR condo. For that person, buying a $600-700k 3 BR house or condo wasn't that much of a stretch, assuming you had the supporting income, especially with the low interest rates. So those folks pushed the price on the "upgrade" units beyond their rental equivalent value.
Now I think people (like me) who bought near the peak haven't seen that kind of appreciation, and are balking at paying $600k+ to get a few more square feet of space. Then I look at the rental market, and I just don't see the point in paying that kind of money. |
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renterstill
Guest
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| Posted: Fri Jun 12, 2009 6:46 pm GMT Post subject: |
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I don't know where you guys find these nice rental 3bdr/1+ SFH, not dated, within 128 and below $2400/month?
1-2bdr units, I agree, there is a lot of new "luxury" developments that were built to sell and ended up leasing vide Oak Grove Village.I simply refuse to support them, there were the ones at the core of the whole mess. I will not give them my money. |
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JCK
Joined: 15 Feb 2007
Posts: 559
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| Posted: Fri Jun 12, 2009 7:09 pm GMT Post subject: |
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Speaking for myself, I think most of the posters are talking about 3 BR apartments/townhouses, not so much SFHs.
At least that's what I'm looking at. I'm completely unfamiliar with the SFH rental market. |
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melonrightcoast
Joined: 22 Feb 2009
Posts: 236
Location: metrowest
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| Posted: Fri Jun 12, 2009 7:57 pm GMT Post subject: calcs |
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I am pretty sure that we've used the tax deduction in our calculation. I'll double check the equations when I get a chance. You'll have to convince me not to use P, since it is a (growing) cost that we would have to pay.
We've moved to our "target town", but I'm still not revealing where that is until we buy. I've already (accidentally) convinced a couple people to move here, which is just more competition until we buy.
We looked at SFH to rent in our town, and were discouraged by what we found because:
1) overpriced. there are SFH still available for rent, for the same price, when I was looking in April and March. Way overpriced: Lexington prices, but not the Lexington location or status.
2) non-flexible lease terms
3) three months rent to move in. I don't really want to give $6K to someone that really just wants to sell their house, but isn't willing to lower the price to do it. Not an entirely rational argument, but we all have our quirks.
4) most SFH were also listed for sale, or were recently listed for sale. With two young kids, I don't want the hassle of the landlord not renewing the lease because he wants to try to sell again, let alone deal with people viewing the property while we lived there (I've done that with one infant, cannot imagine how huge a hassle it would be with one infant and a 4yr old).
5) higher utility costs. We've factored these into our "owning" budget, but would rather not have these additional costs so that we can save the money for actually buying.
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mpr
Joined: 06 Jun 2009
Posts: 344
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| Posted: Fri Jun 12, 2009 8:39 pm GMT Post subject: Re: calcs |
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| melonrightcoast wrote: | I am pretty sure that we've used the tax deduction in our calculation. I'll double check the equations when I get a chance. You'll have to convince me not to use P, since it is a (growing) cost that we would have to pay.
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The point is that your P is theoretically going to build the equity in your
house. Its doesn't disappear as your rent and ITI does, but is more
like the savings you put away each month.
As for SFH's all I meant is that, to be fair you should compare
SFH prices with SFH rents. If you feel both are overpriced then there
is at least some consistency - you may not be willing to pay the
premium for a SFH at all - but you cant argue SFH's are overpriced by
comparing with condo rents. |
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melonrightcoast
Joined: 22 Feb 2009
Posts: 236
Location: metrowest
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| Posted: Fri Jun 12, 2009 9:24 pm GMT Post subject: rent vs. buy discussion |
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| Quote: | The point is that your P is theoretically going to build the equity in your house. Its doesn't disappear as your rent and ITI does, but is more
like the savings you put away each month. |
The "theoretically going to build equity" is weak a argument in a declining market, don't you think? That money, as well as your deposit, is essentially erased as the value of your home drops. Whereas, if you were actually putting that money in savings, or TIPS, as some people on this board like, then the money isn't erased as the market value of your home drops.
| Quote: | As for SFH's all I meant is that, to be fair you should compare
SFH prices with SFH rents. If you feel both are overpriced then there
is at least some consistency - you may not be willing to pay the
premium for a SFH at all - but you cant argue SFH's are overpriced by
comparing with condo rents. |
Yes, you are right, for an accurate comparison, I should be comparing apples to apples. However, with such an affordable and pleasant rental option, we chose to rent an apartment. IMO, and based on the fact that SFH rentals are not moving at the high prices, SFH prices are way out of line. Something has got to give, and it wasn't me or others paying more for a SFH rental. That will eventually bring SFH rental prices down, or SFH sale prices down if sellers get realistic about selling.
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mpr
Joined: 06 Jun 2009
Posts: 344
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| Posted: Fri Jun 12, 2009 9:46 pm GMT Post subject: Re: rent vs. buy discussion |
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| melonrightcoast wrote: | | Quote: | The point is that your P is theoretically going to build the equity in your house. Its doesn't disappear as your rent and ITI does, but is more
like the savings you put away each month. |
The "theoretically going to build equity" is weak a argument in a declining market, don't you think? That money, as well as your deposit, is essentially erased as the value of your home drops. |
There is no doubt that if you believe that the market will continue
dropping substantially then its a bad idea to buy no matter the
numbers. (Hence my qualification of "theoretically"). Not including
P in the calculation assumes stable house prices.
However it seems to me circular to include the P in your calculation
because you believe houses are overpriced and dropping in value,
and then conclude, because of the unfavourable comparison to renting
that houses are overpriced and dropping in value. |
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melonrightcoast
Joined: 22 Feb 2009
Posts: 236
Location: metrowest
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| Posted: Fri Jun 12, 2009 10:30 pm GMT Post subject: |
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| Quote: | There is no doubt that if you believe that the market will continue
dropping substantially then its a bad idea to buy no matter the
numbers. (Hence my qualification of "theoretically"). Not including
P in the calculation assumes stable house prices.
However it seems to me circular to include the P in your calculation
because you believe houses are overpriced and dropping in value,
and then conclude, because of the unfavourable comparison to renting
that houses are overpriced and dropping in value. |
I am having a hard time making sense of your argument. Can anyone else on this board spell it out for me?
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balor123
Joined: 08 Mar 2008
Posts: 1204
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| Posted: Sat Jun 13, 2009 5:51 am GMT Post subject: Re: calcs |
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| melonrightcoast wrote: |
We've moved to our "target town", but I'm still not revealing where that is until we buy. I've already (accidentally) convinced a couple people to move here, which is just more competition until we buy. |
I figured the rent would greatly narrow the options but I'm rather surprised as all these places appear very cheap. You can rent at a 3br Avalon in Lexington for under $2k, though I still think my place is nicer and with a 2br actually has more square footage. In any case, you should know by now that I'm no competition since I'm trying my hardest to leave the state and convince everyone else to do the same (unless it magically changes its way before I can manage to do so) 
| melonrightcoast wrote: |
1) overpriced. there are SFH still available for rent, for the same price, when I was looking in April and March. Way overpriced: Lexington prices, but not the Lexington location or status.
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In other states there are rental communities of lower density housing like duplexes but I haven't seen any here. If population really is a concern, then I don't understand how these cities allow a complex to be built that will house 1000 people but they won't allow lots to hold duplexes. I need to start showing up to town hall meetings to understand what's going on in their minds. Waltham just can't stop building the apartment complexes! How about at least making some of those available for purchase as condos? |
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melonrightcoast
Joined: 22 Feb 2009
Posts: 236
Location: metrowest
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| Posted: Sat Jun 13, 2009 6:40 pm GMT Post subject: |
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| Quote: | | In other states there are rental communities of lower density housing like duplexes but I haven't seen any here. If population really is a concern, then I don't understand how these cities allow a complex to be built that will house 1000 people but they won't allow lots to hold duplexes. I need to start showing up to town hall meetings to understand what's going on in their minds. Waltham just can't stop building the apartment complexes! How about at least making some of those available or purchase as condos? |
From the little I do know, towns have chosen to have the apartment complexes because it allows them to get to their affordable housing limits, and it keeps all the "rif raf" in one space, while limiting the size of the apartments so that there won't be too many big families there. The apartment complex we used to live in in Lexington was going to shaft all the kids in the apartment complex and rotate them to various schools in the district, changing almost every year. Mind, they weren't going to do this to ALL the kids in the district, just the kids in our apartment complex.
And that 3 bedroom at Avalon in Lexington is a third floor walk-up. The other cheap ones at Avalon Lexington Hills are age restricted (55yrs+).
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